Title:
Clarifications to Questions and Criticisms on the Johansen-Ledoit-Sornette Bubble Model

Abstract: The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with
finite-time singular crash hazard rates has been developed to describe the
dynamics of financial bubbles and crashes. It has been applied successfully to
a large variety of financial bubbles in many different markets. Having been
developed for more than one decade, the JLS model has been studied, analyzed,
used and criticized by several researchers. Much of this discussion is helpful
for advancing the research. However, several serious misconceptions seem to be
present within this collective conversation both on theoretical and empirical
aspects. Several of these problems appear to stem from the fast evolution of
the literature on the JLS model and related works. In the hope of removing
possible misunderstanding and of catalyzing useful future developments, we
summarize these common questions and criticisms concerning the JLS model and
offer a synthesis of the existing state-of-the-art and best-practice advices.